By Governor Pete Ricketts
Nebraskans have made property tax relief their number one priority, and it’s my top priority for the Legislature. Senators are now one-third of the way through this year’s short legislative session, with about 40 days to go. Nebraska’s farmers, ranchers, and homeowners are counting on Senators to pass meaningful property tax relief before the session ends.
LB 974 is the main property tax bill under consideration in the Legislature. While its details are still being finalized, I support the bill’s general framework. It satisfies three core principles that must be part of any tax plan that provides real, sustainable relief.
· First, no tax increases.
· Second, protect the Property Tax Credit Relief Fund. The State uses this fund to pay a portion of your property tax bill each year. Senators and I worked together to increase the fund by over 20% last year, and we’ve nearly doubled it during my administration. This money gives property taxpayers direct relief, and it should not be taken for any other purpose.
· Third, encourage spending restraint in local governments.
This last point is pivotal. The only way to achieve long-term property tax relief is to control spending—at both the state and local levels—while we grow Nebraska’s economy. Over the past six years, we’ve successfully controlled spending at the State. On average, we’ve held budget growth to less than 2.4% annually. While we’ve held spending in check, we’ve also increased revenues through economic growth. Nebraska’s economy exceeded the national rate of growth for 2019, and we’ve won three straight Governor’s Cups for attracting new economic development. This has positioned us to reduce property taxes going forward.
For the property tax plan to work, local governments also have to do their part to control spending. The State of Nebraska does not collect or spend a single penny of property taxes. In fact, the State of Nebraska is constitutionally prohibited from doing so. Property taxes are collected and spent by local political subdivisions like government schools, community colleges, cities, counties, and natural resources districts. Among these, K-12 government schools are the biggest spenders. On average, they are responsible for roughly 60% of Nebraskans’ property tax bills. Over the past 10 years, school property taxes have increased by 54%. Meanwhile, inflation has only gone up 17%, and the median household income in Nebraska has only grown 33%.
Nebraska currently has controls in place to limit a school’s year-over-year budget growth to 2.5%. LB 974 would improve these controls by limiting annual budget growth to the inflation rate, tying it to the Consumer Price Index. That rate has increased between 1-2% per year over the last decade. This common-sense revision links school spending to the ups and downs of the economy instead of permitting school budgets to increase without regard to economic conditions. The Consumer Price Index better reflects the real constraints families and private sector businesses face.
LB 974, the Revenue Committee’s property tax bill, has already received support from urban and rural Nebraskans such as small businesses, the Nebraska Chamber of Commerce, Nebraska Farm Bureau, The Nebraska Cattlemen, and many others. The main opponents to the bill have been K-12 government schools. They’ve argued that the bill shrinks their spending.
School lobbyists are wrong. LB 974 does not cut school spending. K-12 government schools are locally run, and school districts continue to have 100% control of their budgets. School boards have the option to ask voters to override the annual budget growth limitation. Local communities can then decide whether or not it’s necessary to raise more revenues for their government schools. This process doesn’t restrict spending; it makes spending more accountable to the people.
Nebraskans generously fund education. The State of Nebraska has fulfilled its TEEOSA obligation each year during my administration. For the 2018-2019 fiscal year, state aid to local K-12 government schools through TEEOSA topped $1 billion. The State gives hundreds of millions more to schools through special education funds, property tax credit and homestead exemption reimbursements, motor vehicle tax collections, and other payments. Compared to peer states in the region, Nebraska spends substantially more per student on K-12 education. Nebraska spends $12,579 per student each year. That’s $1,118 more per pupil than Iowa. We spend $1,618 more per pupil than Kansas; $1,990 more per pupil than Missouri; and over $2,600 more per student than either South Dakota or Colorado! Don’t let anyone tell you that our government schools are underfunded.
I encourage Nebraskans to urge Senators to act this session to get the job done and pass sensible property tax relief. Local government hasn’t gotten to this place—high property taxes—overnight. In addition to legislative action, long-term relief will require ongoing commitment from our citizens to hold local political subdivisions, like K-12 government schools, accountable for how they spend taxpayer dollars. If you have questions about the property tax issue, or want an update on LB 974, please email [email protected] or call 402-471-2244.